Red Hat Opens A New Channel: Red Hat Exchange

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Red Hat went for a Big Bang update on Wednesday, launching Red Hat Enterprise Linux 5 and announcing a new partner program, the Red Hat Exchange (RHX), that will have the Linux goliath selling and supporting software from ISV partners.

Scheduled to launch later this year, RHX will feature applications from commercial open-source vendors such as SugarCRM, MySQL and collaboration suite maker Zimbra, among others. Red Hat will sell RHX wares, handle subscription billing and provide front-line support.

The program emerged from conversations with Red Hat customers and partners about their needs, according to Matt Mattox, director of product management for RHX. Customers wanted a more streamlined path for buying and obtaining support for their open-source software, including applications. Meanwhile, partners want access to Red Hat's base of around 300,000 customers.

"We've been meeting with leaders in the open-source community over the last 14 to 16 months, and they asked us what Red Hat can do to catalyze growth for everybody else," Mattox said.

Partners who have seen a working prototype of the RHX site said it features Amazon-like reviews and encourages purchases of application bundles.

"Click, click, click, you're done," said Matt Asay, vice president of business development for content management software vendor Alfresco. "You can buy it there and get support for everything. It's one-stop shopping."

The approach is winning kudos from early adopters. "They're the gorilla in the space, and obviously we want to get involved," said Jose Morales, vice president of business development at JasperSoft, a business intelligence software developer. "They have a lot of customers and are trusted by a lot of companies."

Red Hat declined to disclose the margin it's taking for RHX sales, but Mattox said the Raleigh, N.C., company is trying to strike a standard deal with all partners. In addition to its sales and marketing push, Red Hat provides level-one support for all of its RHX applications. It will go back to partners for level-two and level-three support, but customers will continue dealing with Red Hat customer service throughout so they have a single point of contact.

Partners said they're comfortable with the margin rates, which one described as "not charitable, but not outlandish."

"They structured this like a standard reseller agreement and made it really easy for us," Morales said.

Other companies have experimented with building an ISV network around their wares -- most notably,, which has had mixed success with its AppExchange platform.

RHX participants said Red Hat's offering is notable for being the first open-source network effort and for its reach. While's AppExchange caters to partners selling add-ons to's CRM system, RHX targets the wider universe of open-source applications.

"They vast majority of our customers already run on Red Hat Linux, so it's a natural thing for us to get involved," said Andy Pflaum, vice president of business development at Zimbra.

Red Hat hasn't announced a launch date for RHX, saying only that it will go live sometime in 2007. Participants are hoping a steady stream of leads come through the pipeline.

Alfresco does well selling into Global 2000-sized companies but has struggled with smaller accounts. "For the SMB channel, we don't really have a clue how to best manage that channel," Asay said. "We haven't really targeted it, and RHX gives us a way to do that. Fifty percent of Red Hat's business is through the partner channel. Frankly, they understand it better than we do."

Red Hat's RHX announcement was part of a broader push around Red Hat Enterprise Linux 5, a major overhaul of the company's flagship operating system and platform. Advances include new virtualization technology, an expanded development environment and toolset, additional hardware support and smoother interoperability with Microsoft Windows.

"This is not just the next release of the operating system; this is truly a platform that we're calling the Advanced Platform. This is the next generation," Red Hat Executive Vice President of Engineering Paul Cormier said at a Webcast launch event in San Francisco.

Red Hat faces increasing competition from its top rival, Microsoft, as well as from companies with deepening Linux ambitions such as Oracle, which is trying to build traction around its Unbreakable Linux support offering. Red Hat took advantage of its megaphone at Wednesday's event to throw a few jabs at its competitors.

"Our friends in Redmond just spent half a billion dollars to launch a new product called Vista. From the reception we saw, it didn't look like customers were that excited about it," Cormier said.

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